Chris Keall

UPDATE: Scroll to end of story for comments from igloo CEO Chaz Savage

A year after it was first announced, NZ's joint venture igloo has launched.

The low-cost pay TV service is 51% owned by Sky TV and 49% by TVNZ.

An igloo set-top box costs $199 - paid for upfront by the customer rather than bundled with service.

Customers then pay $24.99 a month on pre-pay for a "Sky Lite" selection of premium channels broadcast to a UHF aerial including BBC News, BBC Knowledge, UKTV, National Geographic, Animal Planet, Heartland, Vibe, Food Television, Kidzone24, MTV Hits and Comedy Central. The pay channels are broadcast in standard rather than high definition.

If an igloo owner fails to pre-pay, an igloo set-top box can still be used to watch the same mix of free-to-air channels offered by any Freeview decoder.

igloo also features around 1000 on-demand movies ($3 to $7) and TV series ($3 per episode), delivered over broadband, plus a channel that will offer occassional pay-per-view sports events. There is no built-in hard drive for recording programmes.

The service was originally due to launch in the first half of this year.

The Commerce Commission cleared the deal in May (although at the same time it opened an ongoing investigation into Sky TV's ISP partnerships, and whether they its content deals stopped rivals gaining a critical mass of content). But a series of minor technical problems led to more delays.

Poor ISP support
igloo has launched with two of the Big Four ISPs offering umetered data (so it won't count toward your monthly cap when you download pay-per-view movies: Orcon and Slingshot. WorldxChange, Woosh and Snap are also onboard.

But Telecom and Vodafone (now including TelstraClear) are consipcously absent. Together they control around 75% of the home broadband market.

Big win for Sky TV, less clear for TVNZ
NBR's take is that igloo is a big win for Sky TV.

It co-opts one of Sky TV's few potential serious rivals (TVNZ), and it can now tell circling politicians there are two competing pay TV services (albeit with crossover ownership).

Another factor: an igloo box has not hard drive, so can't be used to record TV.

For Sky TV, that's no problem. It can up-sell frustrated igloo users to its full-blooded MySky service.

But for TVNZ, it's a dead-end.

Cost-efficient launch
Analysts don't see igloo having a material impact on Sky TV in the near-term.

Forsyth Barr told NBR it was a cost-effective way for Sky TV to target lower-spending consumers. Sky TV was requiring customers to pay for an igloo box upfront; it was drawing on existing Sky TV channels for premium content, and utilising UHF spectrum it already owned.

Sky TV has chipped $12.75 million into the venture; TVNZ $12.25 million. Most of the money has gone toward the cost of ordering set-top boxes.

A number of NBR readers asked if All Blacks and Super Rugby games, Mr Savage said "Yes. We will have both available from time to time." That may not be a detailed enough assurance for sports fans. NBR suspects 51% shareholder Sky TV won't risk its core business by sprinkingly too much AB content igloo's way.

Others asked why igloo has no hard drive.

The set-top box has two USB jacks, Mr Savage noted (it also has HDMI), so it's possible a hard drive could be added as an option in the future, or that a high-end model could be introduced later on.

But for launch, the company had been very focused on meeting its target $199 price point, which merged in focus groups as a tipping point.

NBR put it to Mr Savage there was no hard drive because Sky TV preferred people to migrate upward to its MySky decoder if they wanted recording functionality.

The CEO replied that, more than five years after MySky was launched, 50% of Sky TV subscribers still used the older version with no recording functionality, and only around one in 10 Freeview decoder buyers plumped for a MyFreeview PVR. This indicated that while the feature was important, it was "not the be all and end all."

igloo was not just targeting budget customers, Mr Savage said. There were some who could afford MySky, but objected to being bound by a a contract. igloo's prepay model would appeal.

Ah. Sounds like just the kind of middle class demographic who would buy a slightly more expensive model with recording functionality ...

Yet another fail for regulators. The move will be damaging to our national broadcaster (which seems determined to shoot itself in the foot) and will likely have negative revenue impacts for Sky. In a market this small and marginal Igloo could be the kiss of death for both players.

Good on ya. Bash away with your kiss of death rubbish. If you think Sky are dumb enough to introduce something that would destroy their own business you're a fool. The reason they're so strong is they are very good at what they do. They've obviously researched a mix of channels which will not adversely affect the purchasers of their premium product - and considering it's giving TVNZ's pay channels Heartland and Kidzone a wider audience, why would it damage TVNZ as well?

TVNZ, with MediaWorks, could have struck a bolder path by, say, adding some paid channels and on-demand content to the Freeview platform.

Majority shareholder Sky TV will always have a natural ceiling on its ambitions for igloo by dint of its (commercially sensible and perfectly understandable) desire not to undermine its own pay TV product.

@ wMc No, you are the fool. SKy are not particularly good at what they do at all. It is just a matter of them being slightly less incompetent than TVNZ and our regulators being a bunch of incompetent fools who are too scared to intervene.

Even though Sky penetration is nearing saturation, many Sky owners will opt for igloo simply to reduce what is at best a luxury item spend (remember, there is a recession on here). Igloo costs quite a bit less than existing MySky subscriptions so Sky do stand to take a revenue hit should this come to pass.

TVNZ, which has invested heavily in Freeview, are seeing their platform undermined by igloo, which could in time render their investment obsolete. That's how.

I suspect there are many people who, like me, don't want Sky, don't care about sport, but want access to the likes of (some of) UKTV, BBC Knowledge and National Geographic, without paying through the nose for all of the other prolefeed Sky (and for that matter the withered spectre of TVNZ) pumps out.

Ah Chris, always such an optimist. I don't watch a lot of telly but I'd like a choice beyond FTA. Do I want to pay $60+ a month for Sky basic? Not really. But I might be keen on a dozenish channels for around $25 as pre-pay.

I think you're coming at this from the position of having Sky already? Sky + Soho + PVR must be about $100 a month or more. That doesnt seem to be igloo's market, and they probably are looking to sell to people who only watch free TV.

Be very clear about this, igloo exists because Sky TV had UHF frequencies they had to use or surrender. Its sole purpose is to retain those $40-50 million worth of frequencies.

TVNZ coming on board was a bonus that just helped save some capital expenditure.

As for content, well it's what Sky can offer without having to pay their partner providers anything extra for - nothing more, nothing less.

The questions to ask if you were running Sky or were a major shareholder (which is over 60% of the company is held in NZ, not by News Corp, as commonly believed) are:

Should this money have been spent on more content/channels for existing subscribers?

Should this money have been spent on a next generation MySky box with internet connectivity?

Should this money have been spent on developing better online content and rights for iSKY/sky.co.nz (including iPhone/iPad, Android, consoles, etc)?

Could Sky have just let the frequencies go and watch competitors scramble to build set-top boxes and negotiate content deals and then focused on improving their overall offering to existing customers and securing new ones?

$15 to watch a one-off sporting event. What a joke. How about a cricket pack where I can watch the NZ international series for a reasonable fee. What about a super 15 pack to watch all Super 15 rugby. Or even a Crusaders pack where I can watch only Crusaders games,etc. I'm sick of paying sky for 30 channels of rubbish. Why do they not get innovative. Something they do not seem to have done since the launch of Sky TV. It's a user-pays society, Why do they not let us only pay for what we want?

After reading all the comments from people who can't record the shows that thet want to view later on, the solution is to connect up to their video/dvd recorder as all these set-top boxes all come with a variety of outlets that can be plugged into a recording device. I have been doing this for the last five years with no trouble at all.